Author: CNBC Online news

Crash tests slam some popular pickup trucks

Jeff Kowalsky | Bloomberg | Getty Images
A Ford Explorer XLT during a head on 30 mile per hour crash test at the company's Crash Barrier Facility in Dearborn, Michigan.

New crash tests show pickups with some of the oldest designs could struggle to protect passengers riding in the front seat.

The Insurance Institute for Highway Safety tested eleven mid-size and full-size pickups and found mixed results.

“In general, the pickup truck class of vehicles is not doing as good a job protecting right front passengers as other classes of vehicles,” said David Zuby, IIHS chief research officer.

Among the the full-size pickups, the Ford F-150, the Ram 1500 and Nissan's Titan received the best possible rating of “good” — one grade above the Honda Ridgeline which was rated “acceptable.”

By comparison, the IIHS says the Chevy Silverado 1500 and GMC Sierra provided “marginal” protection for passengers in the front seat when the right front corner of their truck slams into another vehicle or an object at 40 miles per hour.

Dan Flores, a spokesperson for General Motors says the automaker is continually working to improve the safety of it trucks. “GM designs our vehicles to protect the occupants in a broad range of crashes including front, offset, angle, side and rear impacts,” he said.

The IIHS gave a “poor” rating — the lowest possible — to the Toyota Tundra.

A spokesperson for Toyota told CNBC that “safety and reliability of its vehicles is a top priority.” He added: “We'll continue to look for ways to improve in an effort to exceed customers' expectations — particularly in new testing such as IIHS' passenger-side front small overlap (tests) for pickup trucks.”

Why might some of the most popular pickups struggle with protecting passengers in some of the most common front-end collisions?

The IIHS said part of the problem is that some pickups have older designs that did not emphasize front seat passenger protection to the degree it's expected today.

“We are reasonably confident that when those pickup trucks are redesigned, they will incorporate better protection for the front passenger,” said Zuby.

It's hard to know how much the tests will impact the decisions of truck buyers.

Pickup sales have been surging over the last five years, as more Americans have opted for a truck instead of driving a car. Last year, pickup sales in the U.S. climbed 4.3 percent, according to the auto website Edmunds, while auto sales overall were only fractionally higher.

Ford to build new factory in Michigan for autonomous vehicles

Bill Pugliano | Getty Images
Workers build a truck as it goes through the assembly line at the Ford Kentucky Truck Plant in Louisville, Kentucky.

Ford is building a new plant in Michigan for autonomous vehicles as the company realigns some factories to focus on its future lineup of self-driving and electric cars.

The new facility, scheduled to open in the next two years, will take new commercial-grade hybrid models and incorporate the self-driving technology needed to turn them into autonomous vehicles. Ford is still considering where to build the AV finishing center and has not said how many people will work there.

“This facility will be about more than just putting the brains into these autonomous vehicles,” said Joe Hinrichs, Ford's president of global operations. “We will use the AV production center to upgrade the interiors and add the technology customers will want for a particular self-driving model.”

The new autonomous vehicle, or AV, facility is part of a $900 Million investment Ford announced in 2017 to restructure its manufacturing footprint in Michigan. Ultimately, it's expected to create up to 900 new jobs by 2023. That includes adding a second shift in 2023 at the company's final assembly plant in Flat Rock, Michigan to build an all-electric vehicle the company has yet to announce. That 2023 model is part of Ford's plan increase sales of electric vehicles, including a brand new electric SUV scheduled to roll out next year. It will be built at a Ford plant in Mexico.

Ford's development of autonomous and electric vehicles is at the core of CEO Jim Hackett's plan to remake the automaker. Since taking over as CEO in 2017, Hackett has been criticized by analysts for moving too slow to reposition Ford as the auto industry shifts to new technology and focuses more attention on electric vehicles. Earlier this year, Ford announced a partnership with Volkswagen to share the costs of develop AVs and EVs.

Hinrichs believes Ford's plan to expand production of electric vehicles in Michigan four years from now will be well timed for the changing tastes of car buyers. “We see more consumers interested in electric vehicles. Plus the capabilities of the batteries and the technology is getting better,” he said.

Lyft IPO could be ‘$1 billion or more’ windfall for California’s coffers

Margarethe Wichert | Getty Images
The “Painted Ladies,” a row of historical Victorian homes, are shown with the San Francisco skyline in the background.

California could reap a bonanza of “$1 billion or more” in new taxes from the upcoming stock offering of ride-hailing service Lyft, according to state's former treasurer.

Experts say Lyft's initial public offering and an even bigger IPO expected in April from rival Uber will create many newly-minted millionaires in the Bay region. The state stands to benefit by taxing the capital gains from stock sales.

“We need those billions for education and other areas,” said John Chiang, the state's former treasurer and controller. He said new tax collections “may not happen all at once, and could be spread over time.”

According to its regulatory filing Monday, Lyft is gearing up for an IPO that values the company at near $20 billion. Lyft itself proposes to raise more than $2 billion in proceeds from the offering.

“If you're coming with a $19 billion valuation, you're talking about [a state income tax rate of] 13.3 percent for the millionaires,” Chiang told CNBC. “Even though we're looking at all-in state budget in excess of $200 billion and a general fund budget of about $140 billion-plus, $1 billion or more is significant.”

Lyft's two founders stand to get a big payday from the IPO and keep control of just under half of the company's Class B voting stock. CEO Logan Green's stake could be worth more than $540 million and the company's president John Zimmer's, valued just under $400 million.

For Californians, the state taxes capital gains like any other income. As of 2017, about 70 percent of the the state's general fund revenues come from personal income tax collections.

“IPOs are good for California's bottom line,” said Chris Thornberg, a founding partner with Beacon Economics. The economist said a larger share of the state's general fund today comes from personal income taxes than it did back in 2000 so it makes the state's revenue volatility a concern.

The top 1 percent of the state's personal income tax earners — roughly 164,000 tax returns — generate about half of the personal income taxes in California. A good chunk of the income from the wealthy comes from capital gains and stock options from companies in tech and other industries.

Meantime, Uber is reportedly planning to kick off its offering next month in a deal valuing the San Francisco-based company at a whopping $120 billion.

“When you're talking about Uber and its massive valuation, that's billions,” said Chiang, a Democrat who ran unsuccessfully for governor in 2018.

Other Bay-area tech firms also could join the IPO parade, including Airbnb and Slack.

“A couple of years ago there were reports of over 100 unicorn companies in the San Francisco Bay Area, and how if they ever went public could create extraordinary wealth,” said Chiang.

Chiang said new wealth in the Bay region from tech IPOs could increase housing market values in San Francisco and Silicon Valley. Yet he adds it also could worsen the region's affordability crisis.

“This is an incredible opportunity, and we need to use this as an example of California's prowess,” he said. “But we also should have sensitivity to doing smart things to continue to be the engine for the 21st century economy.”

Fiat Chrysler gains after Peugeot president points to merger potential

Daniel Acker | Bloomberg | Getty Images
A row of Fiat Chrysler Automobiles (FCA) 2017 Crysler Pacifica minivan vehicles are displayed for sale at a car dealership in Moline, Illinois, on Saturday, July 1, 2017.

Fiat Chrysler shares jumped on Tuesday to the top of Europe's STOXX 600 after the president of Peugeot family holding company FFP told French daily Les Echos he would support a new deal and suggested Fiat Chrysler was among the options.

“With them, as with others, the planets could be aligned,” Robert Peugeot was reported as saying, asked about targets for acquisitions or mergers.

Fiat Chrysler declined to comment.

Shares in the Italian-American carmaker were up 5.2 percent by 6:50 a.m. EST, while Peugeot gained 2.7 percent, helping boost Europe's autos index which was up 2.5 percent.

Peugeot's remarks came on the heels of reports the group's CEO Carlos Tavares is open to deals and that Fiat, General Motors, and Jaguar Land Rover could be ideal partners.

FCA's new boss Mike Manley, who took over after deal-making guru Sergio Marchionne died last year, said this month the carmaker was open to pursuing alliances and merger opportunities if they make sense and strengthen its future.

FCA is often cited as a possible merger candidate because of its strong exposure to the North American market, where it generates the lion's share of profits, and because of its popular Jeep, RAM and Maserati brands.

“PSA is essentially an EU pure play as things stand (roughly 90 percent of consolidated unit sales in EU) so an acquisition of a company with a broader reach would make strategic sense,” said Evercore ISI analyst Arndt Ellinghorst.

Investors and analysts alike were wary of betting on an imminent deal, though, mindful of potential antitrust obstacles.

“Although we believe that some M&A could materialize in the automotive sector, we do not expect it in the short term,” said Mediobanca Securities analyst Andrea Balloni.

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Battery start-ups are raising millions in the battle to crush Tesla

Source: Tesla
Tesla's Roadster uses a rechargeable lithium battery that has been the standard for electric vehicles.

For powering your smartphone or your Tesla Model 3, there's currently nothing better than the lithium-ion battery. Since its introduction in 1991, the rechargeable lithium battery has been the standard for everyday tech devices and electric-vehicle power. Many of the world's more than3
million electric vehiclesrun on lithium-ion batteries. But as the world races toward an electric future, it needs something better than the lithium-ion battery in order to keep pace.

“Lithium is pretty much hitting a wall right now. If you really want to increase energy density, you have to go to a completely different paradigm,” said Yifei Mo, a materials science and engineering professor at the University of Maryland. More energy density means cheaper, lighter batteries that last longer on a single charge.

Fortunately, there are battery start-ups trying to build better batteries, ones with lower costs, improved energy densities and better performance for supercharged industrial products and consumer technology, as well as electric vehicles, which would charge more quickly and travel longer distances. Starting this year, several start-ups with batteries they believe are big improvements over current lithium-ion technology will introduce their cells to the commercial market.

“It's taken us eight years and probably 35,000 iterations of our material synthesis just to have something that's commercially ready,” said Gene Berdichevsky, CEO of Sila Nanotechnologies.

Sila Nanotechnologies
Sila Nanotechnologies'is building its first commercial production line for silicon anode batteries.

Sila is just one of several battery start-ups that recently received major funding to continue tweaking battery tech. Last year the Alameda, California-basedcompany took on $70 million in Series D financingfromseveral investors, including Siemens' global venture firm, to build its first commercial production line for silicon anode batteries. That's exactly one decade after being co-founded by Berdichevsky, a mechanical and energy engineer and the seventh employee at Elon Musk's Tesla, who led the development of the battery system in the Tesla Roadster (the car that SpaceX, also founded by Musk, launched into orbit in 2018).

ROI soon to come

Emerging variations of the current lithium-ion battery have taken about 10 years of research. Only now are start-ups gearing up for the commercial spotlight, a rollout that will take at least a few years, and possibly even another full decade.

“The material required for one car is the equivalent of 10,000 smartphones or 1,000 smart watches,” said Berdichevsky. “We'll be in consumer devices to start. Over the next five years, we'll scale up with automotive partners.” One of Sila's current auto partners isBMW.

Battery industry is just getting started, sector insider says
5:28 AM ET Thu, 20 Dec 2018 | 01:48

Current lithium-ion batteries are limited in their material parts and physical energy density. New battery technology seeks to improve both the safety and energy efficiency of lithium-ion batteries where there is no risk of fire if the battery overheats or becomes damaged.

Each lithium-ion battery is composed of four essential parts: the anode and cathode — the electrodes that bookend each lithium-ion cell — a liquid electrolyte and a separator. Positive and negative currents are created as the electrolyte carries lithium ions through the separator to and from the anode and cathode. It's this process that generates the charge that's stored in the battery.

If the chemicals making up the anode and cathode — respectively, graphite and some type of metal oxide — heat up too intensely, it can break down the physical separator, which leaves the highly flammable electrolyte exposed. Recall Samsung Galaxy Note 7 phones exploding and you can see, literally, the problem. And maximum lithium-ion energy density today is about 260 watt-hours per kilogram; by comparison, most current electric vehicles hold between 220 and 250 watt-hours per kilogram.

The next-generation boom

One new battery technology is solid-state, which replaces not only the graphite anode with one made up of lithium metal but also the liquid electrolyte and separator with one solid piece, usually ceramic, glass or flame-retardant polymer. Taking this approach is Solid Power, a Colorado-based manufacturer of solid-state batteries that received $20 million in Series A financing in 2018. According to company executives, the battery they're developing leads to at least 50 percent more energy density.

Secretive Stanford University spinoff QuantumScape is also developing a solid-state battery, in partnership with Volkswagen. Last year Volkswagen increased its stake with a $100 million investment. PitchBook data shows the San Jose-based start-up hasa valuation of $1.75 billion. According to a press release announcing the deal, QuantumScape's battery would allow Volkswagen's E-Golf to travel 466 miles — its current range is 186 miles — on a single charge, making it comparable to ranges achieved by conventional gas-powered vehicles. According to Volkswagen, QuantumScape's battery should be faster-charging and much lighter than current lithium-ion batteries.

“Lithium is pretty much hitting a wall right now. If you really want to increase energy density, you have to go to a completely different paradigm.”
-Yifei Mo, materials science and engineering professor at the University of Maryland

Yet solid-state batteries probably won't be available en masse until sometime next decade, as one Nissan vice president said last year. Even QuantumScape's press release states a commercial production target for 2025.

The longer timeline for solid-state technology is a symptom of how current battery factories are set up. They're built to handle lithium-ion production with liquid electrolytes, and switching to solid materials is more than a matter of just replacing processes on a factory floor.

Sila Nanotechnologies
Sila Nanotechnologies founders (left to right): CTO Gleb Yushin, CEO Gene Berdichevsky and VP of engineering Alex Jacobs

“It's an emerging technology in the very, very early stages of commercialization,” said Dean Frankel, Solid Power's head of business development. “It just takes time from a scale-up standpoint.”

While some start-ups work toward perfecting and scaling up the solid-state battery, others like Sila Nanotechnologies hope to take advantage of current lithium-ion manufacturing processes to bring batteries quickly to market. Instead of creating a solid-state battery, Sila just replaces the graphite anode with one composed of silicon, a material that absorbs lithium ions about four times faster than graphite.

What's more, most lithium-ion batteries with graphite anodes have a charge-rate, or C rate, of less than 1 percent. Start-ups developing new cells with silicon anodes say the C rates of their batteries are much better, a key differentiator to enabling an electric-vehicle future, since most people don't want to wait around more than an hour for a car to charge when pumping gas takes just minutes.

“We can sustain a charge rate 10 times as fast as a conventional graphite cell,” said Robert A. Rango, CEO of Enevate.

The Irvine, California-based company creating a next-generation lithium-ion batteries with silicon anodes is armed with $111 million in funding, which includes an investment made last year by South Korea battery company LG Chem. Rango said Enevate, whose batteries have been in the works for 10 years, is about a year and a half away from the first commercial deployments of its technology, most likely in electric bikes and scooters.

Still, silicon anode batteries have one potential drawback: Silicon material swells, which means every charge causes the battery to deteriorate. It's a problem both Berdichevsky and Rango said their respective companies have solved.

“Silicon does expand, and that's been one of the challenges of the industry,” Rango said. “In our cells, we've been able to contain the expansion. Our cells have specifications that meet electric-vehicle requirements.” Those requirements? That a battery is able to charge to 80 percent after it has been charged and discharged 1,000 times.

The long development timeline for these start-ups is a sign of how difficult pushing battery technology can be. And while improvements in the range of electric vehicles is certainly one of the major implications of a better battery, successors to the current lithium-ion battery will most likely be initially found in much smaller items.

“You're talking about a generational technological shift that has to happen,” Berdichevsky said. “In 150 years of batteries existing, there have been four commercially relevant chemistries to come to market. And every time you go to these new chemistries, they get harder.”

Electric vehicles could cost the auto industry millions of jobs, a top analyst says

Tesla competition heats up as big autos roll out electric car plans
5:38 PM ET Mon, 14 Jan 2019 | 06:01

The electric car has become so popular that it could cost 3 million auto industry jobs in the next three to five years, according to a prominent analyst.

Morgan Stanley's Adam Jonas said in a research note Friday that the auto industry is going to see serious, widespread changes to its labor force. Jonas said electric vehicle production will lead to heavy workforce cuts as companies like Elon Musk's Tesla push big automakers to make them part of the mainstream.

“As auto companies shift production towards electric vehicles, we expect increased pressure on a 100-year-old auto ecosystem supporting millions of jobs globally…representing a risk to labor relations, earnings and the balance sheet,” he said.

Jonas earned a wide following on Wall Street for his early calls on Tesla, as well as his thoughts on electric vehicles. He recently has begun highlighting how electric vehicle start-ups are challenging automakers by transforming the way cars are made.

Morgan Stanley estimates that the global auto supply chain employs “in the range of 11 million people.” Jonas pointed to recent statements by VW Group CEO Herbert Diess, who said it takes 30 percent less labor to produce an electric vehicle than a similarly priced car that has the traditional internal combustion engine. This would result in a headcount cut of more than 3 million workers from the global auto industry.

But that number could increase, Jonas said.

Jonas said tech start-ups like Tesla and Rivian could build electric vehicles at “a 50 percent reduction in direct labor … or more.” That would reduce the global auto supply chain labor force even further. Even at just a 30 percent cut, Jonas estimates the labor force reduction would cost automakers “collectively and over time upwards of” $60 billion.

Maintenance and servicing for electric vehicles is less expensive than traditional cars, another consideration in terms of the labor force needed as the switch to the newer cars continues.

WATCH: Former Tesla CEO on electric vehicle growth

Former Tesla CEO on electric vehicle growth
2:44 PM ET Thu, 7 Feb 2019 | 04:06

Ford is cutting 5,000 jobs in Germany with more cuts coming for the UK

Oliver Berg | picture alliance | Getty Images
North Rhine-Westphalia, Köln: An employee installs a door in a Ford Fiesta at the Ford plant. The US car manufacturer Ford wants to cut 5000 jobs in Germany.

Ford is cutting 5,000 jobs in Germany and more in the U.K. as part of an effort to reduce costs in Europe, the company said Friday.

The automaker offered voluntary separation packages for employees in Germany and the U.K. to help accelerate its plan to improve performance in the region, where Ford has struggled. The total number of jobs affected in the U.K. have yet to be determined.

The automaker is undergoing a larger plan to restructure its operations worldwide, which it's said will cost $11 billion. Ford is reshaping its European business into three different business groups that focus on commercial vehicles, passenger vehicles, and imports. The carmaker plans to simplify its product lines and focus on the most profitable vehicles.

Ford said in January it plans to partner with German carmaker Volkswagen on a number of initiatives, including trucks and commercial vans for markets around the world.

Europe has also been difficult for Ford's Detroit rival General Motors sold off its European business entirely in 2017, to French automaker Groupe PSA and French banking groun BNP Paribas.

Here’s what Wall Street analysts are saying about Tesla’s Model Y: ‘Underwhelming’, ‘no surprises’

Tesla unveils its SUV model starting at $39,000
2 Hours Ago | 04:39

Tesla unveiled its crossover SUV electric vehicle on Thursday night but Wall Street was largely unimpressed by the car and received it with little fanfare.

The shares dropped more than 2 percent in premarket trading Friday.

“Overall, we found the event somewhat underwhelming with no major surprises,” Deutsche Bank's Emmaneul Rosner said in a note.

The Model Y will use about 75 percent of the same parts as Tesla's low cost Model 3, CEO Elon Musk said. That makes the Model Y “likely to cannibalize the Model 3,” Morgan Stanley analyst Adam Jonas said.

Cowen analyst Jeffrey Osborne also said the “Model Y reveal underwhelmed us,” especially since “the night held no surprises.” Osborne said investors were looking for a refresh to the Model S and Model X lines, new software or even details on how Tesla's first quarter is going.

“We remain concerned about the manufacturing timeline,” Bernstein's Toni Sacconaghi said of the Model Y. “Last night's unveiling essentially reaffirmed Tesla's target of “volume” production by the end of 2020.”

A few analysts stuck to bullish sentiment on Tesla as a whole, exemplified by Baird's Ben Kallo, who said his firm continues “to like TSLA into the Q1 delivery release, as we think the negative sentiment on Model 3 demand and Q1 deliveries is overblown.”

Here's what all the major analysts said about Tesla's Model Y unveiling:

Morgan Stanley – Equal-weight, $260 price target

“Likely to cannibalize the Model 3, in our opinion. The Model Y offers substantially greater space, nearly identical performance, and nearly as much range as a Model 3… and it has 2 extra seats in a 3rd row which is a very big deal, especially for the US market … Pricing of Model Y is modestly more (less than 10% more?) than the comparable Model 3… and many might argue you get a lot more bang for the buck in the Y … With this potentially bullish catalyst out of the way, we anticipate a cautious narrative to resume its course until Tesla can put to bed market concerns over near-term demand, cash flow, and liquidity.”

Bernstein – Market-perform rating, $325 price target

“No major surprises with the car. As expected, the car looks very similar to the Model 3 (picture a Model 3 plus an SUV bulge in the back) … We remain concerned about the manufacturing timeline. Last night's unveiling essentially reaffirmed Tesla's target of “volume” production by the end of 2020. This timeline appears similar to the original timeline for the Model 3 ramp, which was ultimately delayed by 9-12 months. That said, Model Y could enjoy a smoother ramp due to its shared platform … That said, Tesla does appear modestly better prepared this time around.”

Goldman Sachs – Sell rating, $210 price target

“With the Model Y vehicle only priced at a $4k premium to the Model 3, we think investor focus will hone in on potential cannibalization of already waning Model 3 demand and the company delivering on margins as it moves to larger scale production. And with no incremental products unveiled (like the pickup truck the company is working on or a potential refresh of the S/X) and no further commentary on Model 3 demand (which investors have been looking for), we think shares could see pressure in trading today. … we estimate the company is likely to see between 200k and 400k orders (in totality) for the product given consumer preferences for utility vehicles vs. sedans.”

Cowen – Underperform rating, $200 price target

“Tesla's Model Y reveal underwhelmed us … The night held no surprises – no S/X refresh, no new software, and no details on 1Q19 … We believe investors will leave the Model Y launch with a neutral to negative outlook on the Tesla story for multiple reasons … We believe the event was more of a capital raising effort and branding exercise. We do not see the new Model Y igniting elevated demand or enthusiasm for the Tesla brand … There was no refresh of the S/X platform … There was no “one more thing” – nothing incremental to get the Tesla bulls excited.”

Bank of America – Underperform rating, $225 price target

“Although the Model Y is unlikely to be available to consumers until at least 2020, it will likely represent one of TSLA's most important models, as it caters to the currently very hot crossover market (in the US and globally). However, it should be noted that all automakers are increasingly chasing the CUV segment and will be launching a slew of new models, which will likely drive an overcrowded market. This will eventually lead to pressure on price, margins, and returns for the entire industry.”

Macquarie Research – Outperform rating, $288 price target

“Model Y may be most important vehicle in Tesla's history, addressing fastest growing US segment at a lower cost than S … We expect Model Y to see strong sales but with an expected launch in late 2020; the key is what will drive demand until the Y launch – we see new geographic releases and existing model refreshes of S & X staggered across the next couple of years driving sales.”

Deutsche Bank – Hold rating, $340 price target

“Overall, we found the event somewhat underwhelming with no major surprises … All in, we believe this event will not detract investor attention from ongoing demand/margin concerns for Tesla's current lineup, and with 1Q19 earnings and cash flow set to be really weak, the stock could remain under pressure in the near term. Beyond it, Tesla will need to demonstrate acceptable gross margins on Model 3 including some standard range models, which could take time and will be very mix dependent.”

Oppenheimer – Outperform rating, $437 price target

“The Model Y Unveil proved long on recapping TSLA's corporate history with few surprises in the vehicle … We believe timing, specs, and price range are largely in line with investor expectations and that many questions remain about capex needs, manufacturing logistics, and depth of demand. We would expect shares to be flattish on the event.”

Baird – Outperform rating, $465 price target

“We believe solid performance specs should position the vehicle well in the attractive and growing market for premium/luxury SUVs. The announced production timeline was in-line with our expectations (higher priced variants will be produced first, expected in Fall 2020) and the company has begun taking orders for a $2,500 deposit. We continue to like TSLA into the Q1 delivery release, as we think the negative sentiment on Model 3 demand and Q1 deliveries is overblown … We think sales of the Model Y should be supported by growing market for premium/luxury crossovers and SUVs. We estimate the U.S. market for premium CUVS/SUVs to be over 1.5M vehicles annually, based on historical sales. We think the Model Y will be able to capture market share (similar to the Model 3) given its competitive pricing and specifications compared to other cars in the class.”

Canaccord Genuity – Buy rating, $450 price target

“Tesla unveils the Model Y but event may fall shy of whisper expectations … The model Y is to the Model X as the Model 3 is to the Model S. A more economical and presumably higher-volume version of Tesla's X … While we anticipate that the Model Y will take time to be a meaningful contributor for Tesla 2021, we view the design and development as further evidence that the company is moving far faster than the legacy auto OEMs and still has a commanding lead in EVs.”

SEC alleges Volkswagen ‘perpetrated a massive fraud’ and repeatedly lied to US investors

David Gray | Reuters

The Securities and Exchange Commission alleged in a court filing that Volkswagen “perpetrated a massive fraud” and repeatedly lied to U.S. investors in connection with the so-called dieselgate scandal.

The regulator is suing Volkswagen and its former chief executive Martin Winterkorn over the German automaker's diesel emissions scandal. The suit seeks to bar Winterkorn from serving as an officer or director of a public U.S. company and recover “ill-gotten gains.” Winterkorn was charged by U.S. prosecutors in 2018 and accused of conspiring to cover up the German automaker's diesel emissions cheating.

The SEC said in its complaint filed in San Francisco that from April 2014 to May 2015, Volkswagen issued more than $13 billion in bonds and asset-backed securities in U.S. markets at a time when senior executives knew that more than 500,000 U.S. diesel vehicles grossly exceeded legal vehicle emissions limits.

“By concealing the emissions scheme, Volkswagen reaped hundreds of millions of dollars in benefit by issuing the securities at more attractive rates for the company,” the SEC said in a summary of its filing.

Volkswagen said the SEC complaint “is legally and factually flawed.” Reuters reported that a lawyer for Winterkorn could not immediately be reached early on Friday.

VW had said in its annual report that the SEC could take enforcement action against the company over the German automaker's involvement in the emissions scandal.

The automaker said the agency is “piling on” and that the agency's complaint is without merit.

The SEC has asked Volkswagen for information on potential securities law violations over certain investments the company may have sold to investors. The agency is looking for evidence determining whether the automaker failed to disclose information about vehicles that didn't comply with U.S. emission standards when it issued certain securities to investors.

The SEC can issue fines and other civil penalties for violations of securities law.

One of the world's largest carmakers, Volkswagen was rocked by reports first surfacing in 2015 that it had been caught cheating on emissions tests in the United States. The subsequent scandal cost Volkswagen billions of dollars to settle and forced the automakers to recall millions of vehicles.

Here is Volkswagen's full statement to CNBC:

The SEC's complaint is legally and factually flawed, and Volkswagen will contest it vigorously. The SEC has brought an unprecedented complaint over securities sold only to sophisticated investors who were not harmed and received all payments of interest and principal in full and on time. The SEC does not charge that any person involved in the bond issuance knew that Volkswagen diesel vehicles did not comply with U.S. emissions rules when these securities were sold, but simply repeats unproven claims about Volkswagen AG's former CEO, who played no part in the sales. Regrettably, more than two years after Volkswagen entered into landmark, multibillion-dollar settlements in the United States with the Department of Justice, almost every state and nearly 600,000 consumers, the SEC is now piling on to try to extract more from the company.

—Reuters contributed to this report.

VW budgets $9 billion for electric vehicles with luxury brand Audi taking lead with 30 new EVs

picture alliance | picture alliance | Getty Images
The Audi Q4 e-tron concept is presented at the Geneva Motor Show on the first press day. The 89th Geneva Motor Show starts on 7 March and lasts until 17 March.

The luxury arm of Volkswagen plans to accelerate its push into battery electric vehicles with 30 BEVs expected to reach the market by 2025, company officials announced during their annual meeting on Thursday morning.

But the move is expected to ding the brand's bottom line. Volkswagen expects to spend about $9 billion on electrification by 2023 — much of that through Audi, which is taking a leading role in the corporate effort. Audi is developing a new battery-vehicle “architecture,” dubbed premium platform electric, or PPE, that will be shared by other brands, including Porsche.

That is one of the key reasons why Audi's operating return on sales will run between 7 and 8.5 percent in the near-term, officials said during a meeting at brand headquarters in Ingolstadt, Germany, compared to a long-term Audi goal of between 9 and 11 percent.

Audi officials said they are taking steps to trim costs, even as they hope to counter a worldwide decline in sales last year.

“The transformation plan is making a significant contribution towards safeguarding our future,” Alexander Seitz, Audi's member of the board of management for finance, China, compliance and integrity, said in Ingolstadt. “Because only in this way is it possible for us to transfer enormous resources into future areas and generate the cash flow to finance electric mobility.”

Audi
Audi e-tron GT Concept car unveiled in Los Angeles on November 28, 2018.

Like its parent, Audi is a relative latecomer to the push into battery propulsion, but it found religion after it was revealed that the German automaker had cheated on emissions tests involving the diesels that were a centerpiece of the corporate powertrain strategy. The scandal that erupted has already cost it around $30 billion in fines and settlements in the U.S. and costs continue to mount in Europe. While VW and Audi aren't abandoning diesels entirely, they are planning to steadily shift emphasis to electrified powertrains.

The Securities and Exchange Commission opened an investigation into the emissions scandal in January 2017 and told the company it may take its own action against the automaker, the company disclosed in a securities filing Thursday.

For its part, Audi is taking a multi-pronged approach to its plans to go electric. It has four new plug-in, hybrid or electric vehicles, or PHEVs, making their debut at the Geneva Motor Show, which runs through Sunday. But, longer-term, the luxury brand is putting the emphasis on pure battery-electric vehicles, or BEVs.

Bloomberg | Getty Images
A monitor displays wing-mirror video camera footage inside an Audi e-Tron.

Audi has unveiled a number of all-electric concept vehicles over the last several years, including the Q4 e-tron that debuted at the Geneva show. And more are coming, starting with the Q2 L e-tron scheduled for the upcoming Shanghai auto show. Another is in the works for the big Frankfurt Motor Show in September.

The Q4 Concept will be tweaked only slightly when it goes into production late in 2020 or early 2021, Audi's global design chief Marc Lichte told reporters in Ingolstadt. He told CNBC last November, that's the same story for the e-tron GT Concept that was unveiled at the Los Angeles Auto Show, with the production model due out in 2020.

The Q2 coming to Shanghai, meanwhile, is expected to translate into a production model specifically earmarked for China that will roll into showrooms within the year.

All told, Audi has announced specific production plans for five battery-electric vehicles so far, a list that includes its first model, the e-tron that started rolling down its assembly line in Brussels last September. The SUV will be followed this year by the e-tron Sportback model.

Both of those models will offer more than 200 miles of range per charge, a figure that industry planners and analysts widely agree is the minimum consumers now expect. There may be some exceptions for so-called “city cars” that would be targeted at urban dwellers whose travel needs are limited.

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Robert Downey Jr. (L) and Head of Design of Audi AG, Marc Lichte attend the global reveal of the Audi e-tron GT concept on November 26, 2018 in Los Angeles, California.

Like its competitors, Audi is counting on driving down battery costs, company officials told CNBC at the Los Angeles Auto Show, though most studies anticipate that the price of battery electric vehicles won't be on par with conventionally powered models until around the middle of the coming decade.

The industry, as a whole, faces a variety of challenges increasing the appeal of battery-cars just as manufacturers begin rolling out a tidal wave of new models. The risk, warned a 2018 study by Detroit-based AlixPartners, is that there could be “a pile-up of epic proportions” coming that would lead to billions of dollars in losses across the industry.

One of the key consumer concerns is charging – both the availability of charging stations and the time it takes to replenish drained batteries.

David Paul Morris | Bloomberg | Getty Images
The new Audi AG E-Tron all-electric sport utility vehicle (SUV) stands during a launch event in Richmond, California, U.S., on Monday, Sept. 17, 2018.

Audi and its parent are pushing to set up public charging networks in both Europe and the U.S. Volkswagen is partnering with erstwhile rivals BMW and Daimler in Europe and, in the States, VW is funding a charging infrastructure through Electrify America. That subsidiary was created with $2 billion set aside from the automaker's diesel emissions settlement.

Many of those chargers will be Level 3, capable of delivering 800 volts of direct current at upwards of 350 kilowatts — about seven times more power than can be delivered by the first generation of DC “fast chargers.” For vehicles capable of taking on that much power, that would allow them to boost range by as much as 20 miles a minute, narrowing the gap with the time it takes to fill up a gas tank.

Audi's electrification plans will rely on the use of two specially designed, skateboard-like architectures that place their batteries and motors below the floorboards. Some low-end models will rely on the MEB platform being developed primarily for the mainstream Volkswagen, Seat and Skoda brands. But most future Audi products will be based on the more advanced PPE architecture the brand is co-developing with Porsche – which has already announced plans for three production models of its own starting with the Taycan sports car going on sale later this year.

The PPE platform boasts advanced capabilities, such as torque vectoring, which allows a vehicle to power through a corner more aggressively. It also allows higher levels of horsepower and torque, a basic requirement for luxury brands like Audi and Porsche.

Audi

The shift to battery electric vehicles is expected to put some of Audi's familiar lineup at risk, notably some performance products like the TT roadster.

“It's part of our DNA,” Audi board member Hans-Joachim Rothenpieler said during a meeting with reporters in Ingolstadt, reported CNET. But while he added that product planners are “fighting for it,” the question is how to make both a technical and a business case for switching it to electric drive.

Other models, such as the R8 supercar, could also be at risk if Audi were to eventually go all-electric. But company officials are hoping to replace such gas-powered products with new performance alternatives, such as the e-tron GT that was introduced in Los Angeles in November.

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